The Fed Knows they Could Harm You, But They’re Not Bothering to Check
The Federal Reserve has plainly stated, in response to my question, that they do not look to see whether they are causing you harm. They state elsewhere that they know they can cause harm, but they’re not watching whether they do.
What harm? When the Federal Reserve (Fed) chooses the rate they control, the one that affects how well the economy runs, it can both help and hurt. Think of it like any medicine that might improve your situation in the short run but, if overdone, might damage your organs and in the long run be worse than what it was treating. Chairman Powell spoke of the harm himself. While describing their steps toward bringing down inflation he noted those steps, “will also bring some pain to households and businesses”.
Specifically he noted there would be, “softening of labor market conditions”. That is, fewer job openings, less demand for workers.
As I’ve noted previously, this doesn’t just mean a lower offer of starting pay. It would mean lower raises for years to come. Employers will do no more than necessary to retain employees when, because of fewer jobs, new candidates are easier to find, and both the employer and employee know that if the employee thinks of leaving, finding another job with better pay won’t be easy. Likewise the size of the employer contribution to a 401(k) might be smaller. Likewise how much success unions have at getting good deals out of negotiations, given that jobs are harder to find, meaning the employer has the better hand. Likewise how well employers treat workers regarding schedules or the many other details that make a job good or bad. So your entire working career experience might be worse, and that could add up to a lot of difference in the quality of your retirement.
Is that accumulated damage over working lifetimes worse than inflation? Maybe, maybe not. The point is the Fed states that they are not checking.
What are they doing? They’re operating on an assumption. Ideally the opposite assumption shouldn’t be made either, but until that balance point is credibly established working people and they’re advocates are on just as solid ground in assuming the damage may well be worse, and demanding policies that detect and implement results that best favor working people.
This should also be considered in the context that this would not just be a momentary loss, but part of a decades long slide in what portion of the national wealth the people doing the work get, as I’ve covered previously. Chairman Powell recently stated they’re, “trying to find the neutral” point where their policies neither restrict nor drive the economy. Except that what has been accepted as “neutral” for many years is not. It is a condition of workers on a constant, slow slide of losing their share of the wealth they create.
In correspondence with a spokesperson for the Board of Governors of the Federal Reserve I asked specifically about that quote from Chairman Powell about their actions bringing “pain”. Do they monitor that pain to see when it might out-balance the benefit? They have enormous amounts of data they collect. Do they have anything to document an effort, or even intention, to review that data with the question in mind, at what point might the cure become worse than the disease? The response? “We do not have anything”.
It’s not that their policies might cause harm, they do. They’ve said that. But they’re not looking to see at what point they should stop.
The Fed policies are not the core issue, they are a symptom of our collective blindness. Progressive leaders and advocates have more people-centered ideas and may feel they’re in the right spot but that’s still a long way from a truly people-centered perspective. Where in the public discourse are the concerns presented in this piece? Why hasn’t this search for the best balance for the long-term benefit for working people been at the top of the public discussion throughout the last few years of fighting higher inflation? It’s not even in our public conception.
Because it is not a topic of the media, the typical worker, who has a vague awareness of something going on to try to lower inflation, would know only that. Fighting inflation seems good and that’s the end of it. If reports are accurate then inflation was a huge factor in the recent election. How many working people do you suppose would be informed enough or savvy enough to have a fleeting thought, “Wait. Is there some trade-off here? Is there some downside I should be considering? Are the leaders benevolently doing best by me? Or is this another case of people needing to stand up to get fair treatment?”. Well, whose job would it be to make them aware of such questions?
If the leaders and thinkers aren’t pushing it into the public discourse then of course the people won’t know it. And without the people agitating for it an appropriate change won’t come about. The quote comes too easy but applies, “Without a vision the people perish”. The Federal Reserve, for their part in this big picture, openly state that they are both obliviously and willingly blind.
